Replies to post #221437 on $Pistol Pete$, $Mick$ & Friends Stock Picks /news,

[mick]

What makes a “Fed Coin” special…
Let’s begin with a couple of readers who want to know how a “Fed Coin” will differ from our current system and why it matters…

I get the differentiation of bitcoin and other limited-supply cryptocurrencies, but I don't get how a Fed Coin differs from what we have today. Admittedly, the Fed prints actual cash, but that is a small fraction of the total U.S. currency. How does a Fed Coin differ from today’s mostly digital currency?

– Dan S.

Hi, Jeff. I’m not understanding the need for a digital dollar. Doesn’t any type of currency have to have some type of physical backing? If this is true, why create something new? Why not continue to use what we have?

Or is the need for a digital dollar because of the perceived security that blockchain may provide?… So I ask, why a new currency? What does it get you?

– Rudy G.

Thank you both for the questions. This is certainly a hot topic of interest.

And as I shared recently, the U.S. Federal Reserve (the Fed) and MIT have been partnering to develop a central bank digital currency (CBDC) over the past several years. We should expect to see tangible progress and testing over the course of the next few years…

Dan, you are correct. A centrally controlled digital currency using blockchain technology wouldn’t functionally be much different than what happens today.

The M0 – the actual amount of physical money in circulation – is a small fraction of the actual money supply. The difference between the physical money (paper notes and coins) and the money supply in bank accounts is that bank accounts are all zeros and ones… completely digital.

Functionally, a Fed Coin and the current digital dollar system in our bank accounts is very similar.

When we send a wire transfer from our bank account to a business to pay an invoice, physical money is never sent. Digital information is used to settle accounts.

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Here’s where the technology differs…

When a blockchain-enabled digital dollar is used for all transactions and all physical money is removed from the system, the Fed Coin actually becomes a cryptographically secured digital ledger of every transaction made using the Fed Coin.

This is why governments like the idea so much. Every single transaction can be tracked and taxed appropriately.

And the technology is getting a lot of attention now because a Fed Coin can enable a completely contactless payment system. No one will need to touch and physically pass paper notes and coins, which reduces the possibility that a virus would spread.

And, Rudy, sadly, a currency doesn’t have to have any kind of physical backing.

Up until 1971, the U.S. government backed the U.S. dollar with gold. Anyone with dollars could exchange $35 for one ounce of gold at a bank. But the gold standard was abandoned in August of that year.

Today, the U.S. dollar is only backed by the “full faith and credit” of the U.S. government. But so far, the “credit” of the U.S. government has proven to be darn good.